water scarcity and irrigation efficiency in egypt
TRANSCRIPT
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Paper prepared for the 17th Annual Conference on Global Economic Analysis “New
Challenges in Food Policy, Trade and Economic Vulnerability”, June 18-20, 2014, Dakar,
Senegal
Water Scarcity and Irrigation Efficiency in Egypt Emanuele Ferrari, Scott McDonald, Rehab Osman1
WORK IN PROGRESS
PLEASE DO NOT QUOTE WITHOUT PRIOR AGREEMENT WITH THE AUTHORS
Disclaimer: the views expressed are purely those of the authors and may not in any circumstances be regarded as stating an official position of the European Commission.
Corresponding author: Rehab Osman Oxford Brookes University Wheatley Campus, Oxford, OX33 1HX Email: [email protected] Tel: +44 (0)1865 485830
1 Emanuele Ferrari is Researcher in the European Commission, Joint Research Centre (JRC), Institute for Prospective Technological Studies (JRC-IPTS). Scott McDonald and Rehab Osman are, respectively, Professor and Postdoctoral Research Fellow of Economics in the Department of Accounting Finance and Economics, Oxford Brookes University.
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Water Scarcity and Irrigation Efficiency in Egypt Abstract ..................................................................................................................................... 3
Introduction .............................................................................................................................. 3
Water Scarcity and Water Quality in Egypt ........................................................................... 4
Irrigation Water Map ............................................................................................................... 5
Conventional Water Resources .......................................................................................... 6
Non-conventional Water Resources .................................................................................. 8
Irrigation Water Quality and Land Productivity .................................................................... 9
Updated SAM for the Egyptian Economy ............................................................................. 10
Single Country STAGE CGE Model ......................................................................................... 12
Production Specification ................................................................................................... 12
Model Closure Rules .......................................................................................................... 15
Simulation Scenarios .............................................................................................................. 15
Simulation Results .................................................................................................................. 17
Macro-economic Impacts .................................................................................................. 17
Sector-specific Impacts ..................................................................................................... 18
Water and Irrigated Land Prices ...................................................................................... 20
Conclusions and Discussion .................................................................................................. 22
Table 1: Available and Potential Irrigation Water Resources .............................................. 6
Table 2: Groundwater Usage ................................................................................................... 9
Table 3: Recycled Drainage Water in the Nile Delta 2000/2001 ......................................... 9
Table 4: Potential Yield Reduction from Saline Water ........................................................ 10
Table 5: SAM Accounts, Egypt 2008/2009........................................................................... 11
Table 6: Macroeconomic Indicators (Real percentage change) ......................................... 17
Table 7: Commodity Exports (Percentage change) ............................................................. 20
Table 8: Income Factors (Percentage change) ..................................................................... 21
Table 9: Domestic Agricultural Production (Percentage change) ...................................... 26
Table 10: Factor Intensity by Agricultural Activity (Percent) ............................................ 27
Table 11: Factor Shares in Agricultural Value Added (Percent) ........................................ 28
Figure 1: Irrigated Land Use .................................................................................................... 8
Figure 2: Agricultural Production Flows in STAGE-WL CGE Model ................................... 14
Figure 3: Domestic Agricultural Production (Percentage change) .................................... 19
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Abstract
Examining the potential implications of changes in irrigation
efficiency associated with improvements in water quality is crucial for
the Egyptian economy. This study provides quantitative assessments
for the impact of quality enhancements of different types of irrigation
water under water scarcity conditions using a single country CGE
(STAGE) model that is calibrated using a new SAM for Egypt. The SAM
segments the agricultural accounts by season and by irrigation
technology; Nile water-dependent and groundwater-dependent
agricultural activities. The simulation results show that Egypt should
be able to manage the potential reductions in the supply for Nile
water with more efficient irrigation practice that secures higher
productivity for Nile water, groundwater and irrigated land. The
results however suggests more ambitious plan to boost irrigation
efficiency for summer rice in order to overweight any potential
shrinkages in its output and exports. Furthermore, the findings show
that even doubling all non-conventional water resources is not
sufficient to compensate the potential adverse impacts of Nile water
losses. This highlights the critical importance of irrigation efficiency
for the Egyptian economy.
Introduction
Water scarcity is problematic in Egypt. Water availability per capita rate is already one
of the lowest in the world. This is suggested for further declines. A major challenge is to
close the rapidly increasing gap between the limited water resources and the escalating
demand for water from various economic sectors.
Nile is the main source of freshwater in Egypt, with a share of more than 95%. The
storage reservoir of Nasser Lake provides 56 billion m3 (hereinafter referred to BCM)
per annum. The issue of Egypt’s share of Nile waters is under difficult negotiations. In
April 2011, Ethiopia has launched the construction of the Grand Ethiopian Renaissance
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Dam, GERD. With water storage capacity of 63 BCM and energy generation capacity of
6,000 MW, the GERD is anticipated to be the biggest hydroelectric power plant and one
of the largest water reservoirs in the continent. Egyptian experts give indications of 20-
34% water reduction when the filling period overcuts the drought period. This is
estimated to be 11-19 BCM on average over the Dam’s filling period.
Shortage of fresh water resources and/or poor quality of these resources would
have outstanding impacts on agricultural activities and the whole economy. Agriculture
plays a significant role in the Egyptian economy and it is the main consumer for fresh
water resources. Agriculture’s share of GDP has been the largest among individual
sectors, contributing about 20% of GDP. It absorbs around 34% of employment. The
agricultural exports account for 13% of total exports. Agriculture consumes about 85%
of the annual total water resource. More than 70% of the cultivated area depends on
low-efficiency surface irrigation systems, which cause high water losses, a decline in
land productivity, waterlogging and salinity problems. Moreover, unsustainable
agricultural practices and improper irrigation management affect the quality of the
country’s water resources. Reductions in irrigation water quality have, in their turn,
harmful effects on irrigated soils and crops.
Water Scarcity and Water Quality in Egypt
Water issue in Egypt is twofold - the increasing gap between demand and supply and
the deterioration of water quality. As Claudia Bürkin explains, Egypt faces two main
challenges: water loss and poor water quality.2 “Egypt loses about 50% of its freshwater
through poor maintenance of supplies and distribution problems, and the water is
polluted,” she says, stressing that a significant number of diseases are water borne.
Polluted water also affects the ecosystems’ balance, the soil quality, and seeps into the
aquifers. “Egypt needs to set up strong standards for water quality and control the
drainage nutrients, pesticides and waste found in the water.” (Sarant, 2013)
It is worth noting here that water loss and deteriorating water quality are
interlinked. Water available for specific purposes is constrained by its quality, on one
2 Claudia Bürkin is the Water Sector Coordinator for the German Development Cooperation and Senior Programme Manager at KfW Development Bank.
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hand, and increasing demand for limited water resources might cause degradation in
quality. Growing population and slum areas, industrial activities, urbanization, pollution
and climate changes adversely affect water quality. Furthermore, higher water quality
implies less risk of water shortage at a given level of output. Besides, higher water
quality leads to higher marginal productivity of other agricultural factors, land in
particular.
It is thus crucial for Egypt to form comprehensive strategy that aims at enhancing
water supply from both conventional and non-conventional resources as well as
preserving water quality. There is an urgent need to gain more insights into water
quality and its implication for agricultural productivity.
“… one of the main components of the agricultural development strategy is to
achieve a gradual improvement of the efficiency of irrigation systems to reach 80 per
cent in an area of 8 m feddans, and to reduce the areas planted to rice from 1.673 m
feddan (2007) to 1.3 m feddan by 2030 in order to save an estimated 12 400 million
cubic meters of water”, (FAO, 2013, p. 13).3
The study aims at examining the potential implications of changes in irrigation
efficiency associated with improvements in water and land quality. It provides
quantitative assessments for the impact of quality enhancements of different types of
irrigation water under water scarcity conditions. The simulation results inform answers
for several research questions. How significant are potential effects of Nile water
reductions on the agricultural sector and the whole economy likely to be? What are the
sufficient enhancements in irrigation efficiency required to compensate the potential
losses of Nile water? Is investing in securing non-conventional water resources,
actually, a viable alternative strategy to the irrigation efficiency strategy?
Irrigation Water Map
This section portrays the irrigation water state in Egypt.
3 Feddan is a non-metric measurement unit of land area used in Egypt, inter alia. A feddan is equivalent to 1.037 acres, 0.420 hectares or 4,220 m2.
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Table 1 portrays different sources for irrigation water whereas Figure 1 locates land
irrigated by these water sources.
Conventional Water Resources
1. Nile Water
Nile is the main source of freshwater in Egypt, with a share of more than 95%. Nile
water accounts for virtually 80% of irrigation requirements. This water source mainly
serves irrigated land in Nile Valley and Nile Delta, which together constitute 85% of
total irrigated land. In 2008/09, total water resources reach 74.2 BCM and total
irrigated land was 8.7 million feddans.
“Egypt’s Nile Valley irrigation system (NVIS) is an excellent example of a multiple
use-cycle system with a high global efficiency but low local efficiencies. Egypt is
interested in expanding the area irrigated by Nile River waters without reducing the
high productivity of the present irrigated areas. To accomplish this will require an
aggressive conservation program. However, directing conservation efforts toward areas
where multiple use-cycles are possible, and thus [Effective efficiency] is already quite
high, will result in little real water savings”, (Keller & Keller, 1995, p. 6).
Table 1: Available and Potential Irrigation Water Resources
Billion
m3/Annum%
Billion
m3/Annum%
Nile Water 51.7 82.59 55.5 75.2
Groundwater 5.2 8.3 11.3 15.3
Drainage Water 3.7 5.91 5 6.8
Treated Sewage Water 1.5 2.4 1.5 2.03
Rain 0.5 0.8 0.5 0.67
Total 62.6 73.8
Usage Availability
Source
2. Ground Water
Ground water is the second largest water source available for irrigation. It accounts for
8% of the total irrigation water. Groundwater-dependent agricultural activities
attributes to 11% of total irrigated agricultural production. Moreover, it is effectively
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the sole source of water in areas like Sinai, Western North Coast (Matruh) and Western
Desert and the New Valley. Table 2 shows groundwater usage and land irrigated by
groundwater in Aresh – North Sinai.
Egypt has large potentials for groundwater estimated to be 7.5 BCM in 2009
(UNSTAT Database). The volume of groundwater entering the country on an annual
basis from Sudan is estimated at 1 BCM. The main source of internal recharge is
percolation from irrigation water, and its quality depends mainly on the quality of the
irrigation water. The groundwater in the shallow Nile aquifer cannot be considered an
independent resource of water as it is renewed only by seepage loses from the Nile,
irrigation canals and drains, and deep percolation from irrigated lands. Deep
groundwater is found in large aquifers in the Western Desert. However, it is found at
great depths and is generally considered a non-renewable resource.
3. Rainfall Water
Egypt has no effective rainfall except for a narrow strip along the northern coastal area
where the average rainfall does not exceed 200 mm (about 1.5 BCM/year). This amount
of rainfall cannot be considered a reliable source of water due to its spatial and
temporal variability.
Land irrigated by rainfall water locates mainly alongside the Mediterranean shore
between Al-Salloum in the west, near the Libyan border, and Rafah in the east, along the
border with the Palestinian Territories. Besides, 251,000 feddans are irrigated in Sinai
depending on seasonal rains.
Around 150 thousand feddan in the Western North Coast irrigated by rainfall is
cultivated in cereals, legume, vegetables and fruits. The Northern coastal region
depends mainly on winter rainfall. This area is extremely vulnerable to drought and
thus supplementary irrigation is required to improve the crop productivity in this
region, Abdrabbo et al. (2012, pp. 29-33). One suggestion to secure the required
irrigation water for the region is by saving 5 BCM of the Nile water wasted in the sea
(M., 2011). For detailed explanation of water harvesting and supplemental irrigation,
see (Oweis, Hachum, & Kijne, 1999, pp. 19-26).
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Figure 1: Irrigated Land Use
Source: (El-Nahrawy, 2011)
Non-conventional Water Resources
1. Recycled Drainage Water
Annual drainage water utilized in agriculture is estimated to be 4.7 BCM in 2008/09
with impressive potentials to reach 10 BCM over a span of ten-years. Drainage water is
evenly mixed by Nile water and reused in irrigating 450 thousand feddan in North Sinai
(East Suez Canal).
2. Treated Sewage Water
Treated sewage water used in irrigation is 1.67 BCM in 2000 with estimations to reach
2.4 BCM in 2027.
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Table 2: Groundwater Usage
Drinking
Water
Irrigation
WaterField Crops Vegetables Fruits
East Aresh 403 2500 69 394 60855 31800 23046 17979
Aresh Delta 151 3000-4000 81800 20416 23210 25185
West Aresh 662 2500-3000 38000 28950 2832 3129
Usage Current Cultivated Area (feddan)
AreaWithdraw
m3/daySalinationNumber of Wells
Irrigation Water Quality and Land Productivity
It is worth noting here that the conventional definition of efficiency for a given input is
measured by the generated output. Keller and Keller (1995) demonstrate that the
classical definition of irrigation water efficiency is applicable to examining irrigation
design and management but is not precise in the case of studying water allocation.
Failure to consider the inevitable water discharge, which occurs during irrigation in
form of runoff or seepage, and the recycled drainage water leads to ill-defined measure
of efficiency. For the purpose of this study, it is appropriate to use productivity as an
approximate for efficiency.
Agricultural activities and the associated drainage network contribute to water
quality deterioration in Egypt. Covering the whole Nile Valley and Delta, the drainage
network discharges wastes into the Nile mainstream or the northern lakes and sea
coast. This irrigation misconduct affects water quality through three channels: changing
salinity level, adding chemical fertilizers and pesticides to irrigation water and
eutrophication of water bodies. ((RIGW), 1996). The various pollution loads led to
significant water quality degradation, Table 3.
Table 3: Recycled Drainage Water in the Nile Delta 2000/2001 (BCM per annum)
Salinity Level East Delta Middle Delta West Delta Delta
< 750 0.664 0.085 0.575 1.324
750-1000 0.422 0.458 0 0.88
1000-1500 0 1.416 0.067 1.483
1500-2000 0.744 0 0 0.744
2000-3000 0 0 0.416 0.416
Total 1.83 1.959 1.058 4.847 Source: Drainage Research Institute (2004)
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“In Egypt, perhaps the most critical factor in predicting, managing, and reducing
salt-affected soil is the quality of irrigation water being used (The main sources of the
salinity in the Delta soils are irrigation water, Mediterranean saline water and the high
level water table). Besides affecting crop yield and soil physical conditions, irrigation
water quality can affect fertility needs, irrigation system performance and longevity,
and how the water can be applied. Therefore, knowledge of irrigation water quality is
critical to understanding what management changes are necessary for long-term
productivity”, (Noureldeen, 2013, pp. 1-2). Table 4 provides quantitative estimations for
potential yield reductions due to increases in salinity level of irrigation water.
Table 4: Potential Yield Reduction from Saline Water
0% 10% 25% 50%
Barely 5.3 6.7 8.7 12
Wheat 4 4.9 6.4 8.7
Sugarbeet* 4.7 5.8 7.5 10
Alfalfa 1.3 2.2 3.6 5.9
Potato 1.1 1.7 2.5 3.9
Corn (grain) 1.1 1.7 2.5 3.9
Corn (silage) 1.2 2.1 3.5 5.7
Onion 0.8 1.2 1.8 2.9Dry Beans 0.7 1 1.5 2.4
Yield Reduction (%)
ECw
Crop
Updated SAM for the Egyptian Economy
A new Social Accounting Matrix (SAM) for Egypt in 2008/2009 is developed and
updated as part of this project. Data are mainly based on the most recent (Central
Agency for Public Mobilization and Statistics (CAPMAS), 2010). In addition, data for
institutional sector accounts are collected from (Ministry of Planning (MOP), 2011).
Data for detailed agricultural crops by irrigation seasons are compiled from the most
recent issues of Bulletin of Agricultural Statistics. In addition, data on agricultural cost
and return is the most recent issues of Bulletin of Agricultural Prices, Costs and Net
Returns. Data on water requirements are compiled from (The Central Agency for Public
Mobilisation and Statistics, December 2009). It is worth noting here that water
requirement refers to blue water only.
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Table 5: SAM Accounts, Egypt 2008/2009
No SAM Activity No No SAM Activity
1 Winter Wheat 19 37 Education
2 Winter Cereals 20 38 Social Services
3 Winter Sugar Beet 21 39 Arts Entertainment
4 Winter Fodders 22 40 Other Services
5 Winter Fibbers 23 41 Financial Services
6 Winter Medical Plants 24 42 Insurance
7 Winter Vegetables 25 43 Public Services
8 Summer Rice 26 44 Defence
9 Summer Other Crops 27 45 Public Safety
10 Summer Sugar Cane 28 46 Economic Affairs
11 Summer Cotton 29 47 Environmental Protection
12 Summer Fodders 30 48 Housing and Community Amenities
13 Summer Oily Crops 31 49 Health
14 Summer Medical Plants 32 50 Recreation, Culture and Religion
15 Summer Vegetables 33 51 Education
16 Nili Rice 34 52 Social Protection
17 Nili Other Crops 35 53 Non-profit Activities Serve HH
18 Nili Fodders 36 54 Subsistence HH Activities
No SAM Commodity No No SAM Factors
1 Wheat 9 1 Labour
2 Cereals 10 2 Capital
3 Rice 11 3 Winter Nile-dependent Land
4 Vegetables 12 4 Summer Nile-dependent Land
5 Fruits 13 5 Nili Nile-dependent Land
6 Coffee Tea 14 6 Year-round Nile-dependent Land
7 Other Agriculture Forestry Fishery15
8 Ores Minerals Gas 16
No SAM Factors No No SAM Factors
7 Winter Nile Water 11 15 Winter Ground Water
8 Summer Nile Water 12 16 Summer Ground Water
9 Nili Nile Water 13 17 Nili Ground Water
10 Year-round Nile Water 14 18 Year-round Ground Water
SAM Factors
Winter Groundwater-
dependent Land
Summer Groundwater-
dependent Land
Nili Groundwater-dependent
Land
Year-round Groundwater-
dependent Land
SAM Activity
Nili Oily Crops
Nili Medical Plants
Nili Vegetables
Fruits
Other Agriculture, Forestry,
Fishing
Mining
Manufacturing
Electricity gas
Water Supply
Construction
Trade
Suez Canal
Transportation
Accommodation Services
Information Communication
Real Estate
Professional Services
Administrative Services
SAM Commodity
Trade
Food Products
Other Transportable Goods
Metal machinery equipment
Construction
Financial Services
Business Services
Social Services
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Data on agricultural trade are compiled from (Ministry of Industry and Foreign
Trade & Egyptian International Trade Point (EITP), 2008-2009). It is worth mentioning
that agricultural trade data is sourced from Central Agency for Public Mobilization and
Statistics (CAPMAS).
Cross entropy method is used to balance the original SAM and then to
disaggregate the agricultural activity and commodity. Aggregates from national
accounts and supply/use tables are used to control the transaction values for the
disaggregated SAM. Final SAM includes 54 activity accounts, 16 commodity accounts
and 18 production factor accounts. Table 5 portrays the basic account in the Egyptian
SAM.
Single Country STAGE CGE Model
This study uses a comparative static variant of the single-country CGE STAGE model.4 In
this version (i.e. STAGE-WL) of the model, a CES nest is added to the production
function representing derived demand for Nile water and land as well as other sources
of irrigation water.
Production Specification
As depicted in Figure 2, production relationships for agricultural activities are specified
through five level CES function. At the top level, value added and intermediate demand
are combined using a CES aggregator. At the second level of the nest, a CES production
technology specifies the aggregate value added as a function of primary inputs demand
in each activity. The primary inputs are capital, labour and aggregate water/land for
agriculture. By maximizing profit, farmers determine the optimal supply level of crops
output according to the production technology prevailing in each activity. This per se
specifies their derived demand levels for production factors. Farmers demand a
production factor at the level that equalizes the value of its marginal product with its
wage rate in each activity.
4 STAGE model, described in detail in McDonald S. (2007), is a descendant of the USDA ERS model (Robinson, Kilkenny, & Hanson, 1990).
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For the purposes of this study, aggregate land for agriculture is composite of
irrigated land and rain-fed land. At the third level of the agricultural production
function, rain-fed land and composite irrigated land are combined through a CES
aggregator. Composite irrigated land is land irrigated by either Nile water or
groundwater.
The model is developed to segment groundwater-dependent agricultural activities
from Nile water-dependent agricultural activities. At the fourth level of the agricultural
production function, Nile land/water composite and groundwater land/water
composite are combined through a CES aggregator. This allows for specifying different
levels of substitutability between these two types of irrigated land. Both types of
irrigated land are mobile across crops subject to changes in the ratios for land rent in
each activity to the average land rent.
At the bottom level, water and land are combined according to two CES
aggregators – each for Nile water-dependent and for groundwater-dependent activities.
The greater the irrigation water quality available for specific activities, the lower is the
water price, and the higher is the land rent. The price for composite irrigated
land/water changes depending, inter alia, on the prevailing irrigation technology. The
latter is measured by factor intensity for irrigated land and water. The activities with
increasing irrigated land/water price withdraw irrigated land/water from other
activities according to the elasticity of substitution between the two types of irrigated
land: Nile water-dependent land and groundwater-dependent land. Excess irrigated
land supply pushes irrigated land rent to drop in order to clear the market. The farmers
utilize irrigated land at the level that equalizes the value of its marginal product with its
rent rate in each activity. This per se specifies the optimal level of derived demand for
irrigated land.
Three points worth highlighting here. Firstly, the model is flexible in the sense that
it allows for specifying Leontief fixed coefficient at the different levels of the water/land
production nest. Secondly, the model specifies physical supply constraints for water and
the two types of land. Demand volume transactions for both land (by thousand feddan)
and water by agricultural activities are employed as upper limits for total supply of
water and land. Also, water supply activity deals with non-agricultural uses of water.
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Figure 2: Agricultural Production Flows in STAGE-WL CGE Model
The model assumes no distribution cost of irrigation water. Under an additional
closure rule, the model sets production volumes to be fixed at their baseline levels. This
is applied at the third level of the CES production function for all agricultural activities
except ‘Other Agriculture Forestry Fishery’. This specification allows endogenously
quantifying changes in efficiency required to offset the water losses keeping agricultural
output unchanged. Under different levels of water loss, generated changes in efficiency
are measured for the land/water composite production factor.
Output
va
Labour
nLand/Water
Capital
x
Intermediate inputs Value Added
nLand nWater
nl/w
Intermediate n
gLand/Water
Land/Water
nlw/glw
gWater gLand
gl/w
Land
Rain-fed Land
irl/rfl
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Model Closure Rules
Egypt is a small country in the world market. It is, thus, plausible to fix world prices for
exports and imports. The model assumes that current account balance is fixed at its
initial benchmark level. To clear the external balance, real exchange rate is allowed to
adjust.
The model adopts investment-driven closure in the sense that saving rate adjusts
to generate the required savings to finance the baseline investment. Foreign saving is,
exceptionally, specified as exogenous.
Capital is specified to be mobile and fully employed. Labour is mobile, albeit under
employed. Water and land, for both Nile water-dependent and groundwater-dependent
activities, are fully employed, but season-specific. For the purposes of this study, water
and land supply are set to be fixed for each irrigation season. Thus, water and land are
allowed to be mobile across agricultural activities within each irrigation season but not
across different seasons.5 This specification implies that water and land would have
seasonal prices.
Simulation Scenarios
The simulation scenarios distinguish irrigation systems according to different levels of
irrigation efficiency. For agricultural activities producing the same crop, water quality
and, hence, land productivity varies according to the employed irrigation system: Nile
water-dependent versus groundwater-dependent. This paper reports four main
simulation scenarios:
1. N-Wtr Loss: Nile Water Loss
The first scenario simulates the Nile water loss in isolation, which reflects the upper
limit of potential reductions of Egypt’s share of Nile water. It assumes a 34% reduction
in Nile water supply evenly spread across irrigation seasons.
5 The elasticity of substitution between water and land are based on estimations (provided by Calzadilla et al. (2011)) for Middle-East countries which are equal to 0.06.
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2. Irrg-Eff: Irrigation Efficiency
The second scenario considers improvements of irrigation efficiency. An external shock
of 30% increase in irrigation efficiency is simulated. For better interpretation of the
determinants of the results, this scenario is decomposed into two components
according to the source of the simulated irrigation efficiency: Nile water-dependent
irrigation (Nile Irrg-Eff) and groundwater-dependent irrigation (Ground Irrg-Eff).
The point to mention here is that the model does not specify the underlying source
for funding the simulated improvements in irrigation efficiency. That is to say,
government expenditure on R & D, for example, is not explicitly specified by the model.
3. N-Wtr Loss & Irrg-Eff: Nile Water Loss & Irrigation Efficiency
The third scenario combines the simulated 34% reduction in Nile water with the 30%
improvement in irrigation efficiency. This comprehensive scenario provides
quantitative assessments for the impact of quality enhancements of different types of
irrigation water under water scarcity conditions.
4. X-Wtr Gain: Non-conventional Water Gain
The last scenario assumes ceteris paribus more non-conventional water resources are
secured to compensate the simulated reductions in Nile water. It implicitly represents
the case in which Nile water loss is compensated by increases in recycled drainage
water and treated sewage water. As discussed earlier, the potential average increase in
these two water resources is estimated to be 95%.6 Due to lack of data, an increase in
ground water is simulated as a proxy for potential increases in all other non-
conventional water resources. Ground water used in irrigation is roughly equivalent to
both recycled drainage and treated sewage water combined, see
Table 1. This scenario thus represents a 95% increase in ground water supply across
different irrigation seasons.
6 This is weighted according to their current shares of total irrigation water.
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Table 6: Macroeconomic Indicators (Real percentage change)
Nile Irrg-Eff Ground Irrg-Eff Irrg-Eff
private consumption -0.30 0.53 0.03 0.55 0.26 0.02
government
consumption0.03 -0.06 0.00 -0.06 -0.03 0.00
investment
consumption-0.13 0.22 0.01 0.23 0.10 0.02
absorption -0.23 0.41 0.02 0.43 0.20 0.02
import demand -0.16 0.11 0.00 0.10 -0.07 0.04
export supply -0.25 0.23 0.00 0.24 -0.03 0.06
GDP from expenditure -0.26 0.45 0.02 0.47 0.22 0.02
total domestic
production -0.32 0.56 0.03 0.59 0.27 0.02
total intermediate
inputs -0.42 0.72 0.04 0.75 0.34 0.02
Efficiecny N-Wtr Loss &
Irrg-EffN-Wtr Loss X-Wtr Gain
Source: model results.
Simulation Results
Macro-economic Impacts
At the economy-wide level, slight negative impact is reported under the N-Wtr Loss
scenario, Table 6. The simulated irrigation efficiency generates around 0.5% increases
in GDP and total absorption. Potential increases in non-traditional water resources
induce trivial positive economy-wide impacts.
The reported positive effects generated under the Irrg-Eff scenario imply that the
simulated 30% improvement in irrigation efficiency is virtually sufficient to offset the
potential 34% loss in Nile water supply. The results are primarily driven by the
simulated enhancement in Nile water-dependent irrigation efficiency. This is attributed
to the major importance of the Nile water-land for agriculture as a whole and irrigated
agricultural in particular. Nile water/land accounts for virtually 15% of total
agricultural value added and 90% of total irrigated agriculture. Ground water and land
irrigated by ground water have small shares in total agricultural value added (less than
2%) and in total irrigated agriculture (8%).
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Sector-specific Impacts
At the sectoral level, reductions in Nile water availability have noticeable adverse
impacts on summer agricultural production, Figure 3. This is particularly the case for
rice, other crops and sugar cane. Other sectors expand (e.g. winter and summer
vegetables) under the N-Wtr Loss scenario. Improving Nile water-dependent irrigation
efficiency generates positive effects for sectors like winter cereals and summer other
crops whereas all seasonal vegetables sectors shrink. The simulated increases in non-
conventional water resources boost the fruits sector.
Rice is of a great importance to the Egyptian economy. This sector solely
contributes more than 6 percent of total agricultural production. Furthermore, it is one
of the main exporting sectors. Rice is cultivated mainly in the summer season with only
0.4% of total rice output grows in the Nili season. This water-intensive crop solely
consumes more than 30% of annual irrigation Nile water and more than half of summer
Nile water.
The N-Wtr Loss scenario has a strong negative impact (-20%) on rice exports.
Under the comprehensive N-Wtr Loss & Irrg-Eff scenario, rice exports drop by only 4%.
Improving Nile water-dependent irrigation efficiency boosts rice output (by 4% in the
summer and 6% in the Nili seasons) without increasing irrigation water requirements.
Furthermore, combining irrigation efficiency with Nile water loss mitigates the negative
impacts on rice exports, Table 7. Doubling all other non-conventional water resources
has negligible impact on summer rice. From this perspective, more ambitious plan to
boost irrigation efficiency for this sector is recommended in order to overweight any
potential shrinkage in rice output and exports.
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Figure 3: Domestic Agricultural Production (Percentage change)
Vegetables comprise 23% of agricultural output evenly circulated over the winter
and summer seasons. It roughly consumes 6% of Nile water used in each of the
irrigation seasons. Interestingly, winter and summer vegetables output rise under the
N-Wtr Loss scenario. According to the factor market clearing conditions, water and land
are allowed to move across activities within each irrigation season, but not across
seasons. Reduction in water availability pushes the agricultural structure to be more
concentrated in less hydro-water crops. As such, the winter and summer vegetable
sectors attract excess Nile water and land leading to expansions of 3-4%.
Improving Nile water-dependent irrigation efficiency adversely affects the
vegetables sectors in all irrigation seasons. These negative impacts are worse under the
comprehensive irrigation efficiency scenario.
Clearly, interpreting these findings requires more detailed analyses for production
technology prevailing in the baseline scenario as well as changes in factor prices and
rents under the simulation scenarios. The next sub-section addresses these effects.
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
W. W
hea
t
W. C
erea
ls
W. S
uga
r B
eet
W. F
od
der
s
W. F
ibb
ers
W. M
edic
al P
lan
ts
W. V
eget
able
s
S. R
ice
S. O
ther
Cro
ps
S. S
uga
r C
ane
S. C
ott
on
S. F
od
der
s
S. O
ily
Cro
ps
S. M
edic
al P
lan
ts
S. V
eget
able
s
N. R
ice
N. O
ther
Cro
ps
N. F
od
der
s
N. O
ily
Cro
ps
N. M
edic
al P
lan
ts
N. V
eget
able
s
Fru
its
Oth
er a
gri
N-Wtr Loss
Irrg-Eff
N-Wtr Loss &Irrg-Eff
X-Wtr Gain
Modelling Water Quality
20
Table 7: Commodity Exports (Percentage change)
Nile Irrg-Eff Ground Irrg-Eff Irrg-Eff
Wheat -3.95 16.87 1.22 18.16 13.70 0.19
Cereals -7.18 44.42 1.74 46.82 36.19 0.00
Rice -19.46 19.78 0.35 20.16 -3.58 -0.05
Vegetables -3.42 8.81 0.39 9.20 5.46 0.01
Fruits -6.57 -1.09 -0.06 -1.14 -7.62 7.99
Coffee Tea -6.26 10.12 0.60 10.71 4.03 0.03
minerals gas 0.56 -0.82 -0.05 -0.86 -0.30 -0.16
Food products -0.20 0.46 0.02 0.47 0.32 -0.11
Other transportable
goods-0.31 0.60 0.03 0.62 0.35 -0.06
Metal machinery -0.41 0.75 0.04 0.78 0.42 -0.04
Construction 0.19 -0.29 -0.02 -0.31 -0.11 -0.05
Trade 0.33 -0.49 -0.03 -0.52 -0.18 -0.11
Financial services 0.25 -0.36 -0.02 -0.38 -0.11 -0.08
Business services 0.33 -0.48 -0.03 -0.51 -0.17 -0.10
Social services 0.44 -0.72 -0.04 -0.75 -0.31 -0.09
N-Wtr Loss &
Irrg-EffN-Wtr Loss
Efficiency
X-Wtr Gain
Source: model results.
Water and Irrigated Land Prices
Under the Nile Irrg-Eff scenario, Nile water and Nile water-dependent land rents drop
as they become more efficient.7 The expanding activities (e.g. winter cereals, summer
rice, summer other crops and cotton) withdraw the mobile factors (i.e. labour, capital,
year-round Nile water and year-round Nile-water dependent land) from other activities
and push their prices and incomes to raise, Table 8.8
7
Increasing production factor productivity implies higher effective factor endowment, which consequently affects factor demand and price. Within this multi-sector modelling framework, changes in productivity of specific factors/sectors affect demand and price for other factors/sectors through different transmission channels. The higher the factor productivity, the lower is its effective price. Consequently, producers substitute other factors/intermediate inputs by the cheaper factor. Changes in factor productivity entails also lower production cost and, hence, lower price. Consumers gain and their demand increases, which consequently boosts production. 8 In this general equilibrium framework, the causal relationship between factor demand and factor rents works in two directions. Excess demand for a production factor pushes its average rent to rise in order to clear the market. Simultaneously, producers substitute this factor, which became relatively more expensive, for other factors according the elasticity of substitution at the fourth level of the CES production function.
Modelling Water Quality
21
Table 8: Income Factors (Percentage change)
Nile Irrg-Eff Ground Irrg-Eff Irrg-Eff
labour -0.42 0.78 0.04 0.81 0.41 0.03
capital -0.40 0.72 0.04 0.75 0.37 0.03
fRfLnd 7.60 -12.18 -0.68 -12.74 -6.15 -0.16
winter Nile land -1.35 -2.52 -0.77 -3.23 -4.51 -0.19
summer Nile land -2.12 -0.65 -0.45 -1.07 -3.21 -0.11
nili Nile land -4.13 -0.73 -0.51 -1.22 -5.39 -0.10
Nile land year-round
crops-3.78 0.13 0.01 0.14 -3.57 4.25
winter Nile water 9.91 -2.27 -0.67 -2.88 6.89 -0.17
summer Nile water 6.12 -2.31 -0.30 -2.57 3.27 -0.05
nili Nile water 4.25 1.40 -0.28 1.12 5.49 -0.06
Nile water year-round
crops6.75 0.13 0.01 0.14 6.99 4.25
winter Ground land 4.17 -10.95 8.27 -3.55 0.54 3.89
summer Ground land 4.76 -8.98 8.58 -1.14 3.55 4.73
nili Ground land 5.27 -8.85 8.74 -0.89 4.21 2.39
Ground land year-
round crops-3.78 0.13 0.01 0.14 -3.57 4.25
winter Ground water 4.20 -11.57 8.22 -4.26 -0.17 -16.65
summer Ground
water3.60 -8.33 8.51 -0.49 3.14 -15.10
nili Ground water 1.79 -7.61 8.63 0.40 2.45 -17.34
Ground water year-
round crops-3.78 0.13 0.01 0.14 -3.57 -11.78
Ground water-depenent Factors
N-Wtr LossN-Wtr Loss &
Irrg-Eff
EfficiencyX-Wtr Gain
Nile water-depenent Factors
Source: model results.
Table 10 and Table 11 present factor intensity and factor allocation respectively.
The former reflects the prevailing technology in different activities while the latter
represents factor usage across activities. These two indicators are essential for
understanding any potential change in factor rents and the consequent changes in
factor allocation after a policy shock.
Among the agricultural sectors, vegetables have the lowest Nile water/land
intensity ratios. Nile water/land intensity ratios for the seasonal vegetables sectors
range 6-12%. As such, the vegetables sectors are relatively less Nile water/land-
intensive compared to other sectors. Besides, the vegetables sectors occupy small
shares of total Nile-water (6.3%) and Nile-land (21%).
The experienced increases in factor prices under the Nile-Irrg Eff scenario entail
higher production costs for sectors that are relatively more dependent on these factors.
Modelling Water Quality
22
As such, the seasonal vegetables sectors experience increasing production cost. Hence,
these explain the reported shrinkages.
Conclusions and Discussion
The simulation results suggest that Egypt should be able to manage the potential
reductions in the supply for Nile water with more efficient irrigation practice that
secures higher productivity (30%) for Nile water, groundwater and irrigated land. The
results however suggests more ambitious plan to boost irrigation efficiency for summer
rice in order to overweight any potential shrinkages in its output and exports.
Furthermore, the findings show that even doubling all non-conventional water
resources is not sufficient to compensate the potential adverse impacts of Nile water
losses. This highlights the critical importance of irrigation efficiency for the Egyptian
economy.
Modelling Water Quality
23
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Table 9: Domestic Agricultural Production (Percentage change)
Nile Irrg-Eff Ground Irrg-Eff Irrg-Eff
Winter Wheat -1.03 3.64 0.28 3.90 2.90 0.04
Winter Cereals -3.72 20.25 0.87 21.26 16.66 0.00
Winter Sugar Beet -0.30 8.84 0.06 8.90 8.79 0.01
Winter Fodders -3.87 3.28 0.10 3.38 -0.54 -0.04
Winter Fibbers -0.92 15.31 0.14 15.48 14.36 -0.01
Winter Medical
Plants2.02 9.81 0.11 9.93 12.05 -0.07
Winter Vegetables 3.78 -5.37 -0.08 -5.45 -1.82 0.00
Summer Rice -3.13 3.55 0.03 3.59 -0.48 0.00
Summer Other
Crops-6.51 11.72 0.31 12.03 5.09 0.11
Summer Sugar Cane -14.70 3.25 -0.27 2.98 -11.66 -0.11
Summer Cotton 2.01 3.72 -0.32 3.42 5.45 -0.12
Summer Fodders 1.27 4.72 1.46 6.10 7.46 0.63
Summer Oily Crops 1.14 5.86 0.40 6.23 7.69 -0.15
Summer Medical
Plants-1.98 10.85 -0.21 10.64 8.52 -0.09
Summer Vegetables 3.08 -0.96 -0.07 -1.04 2.15 -0.02
Nili Rice 31.73 -4.02 10.93 5.90 37.78 -0.96
Nili Other Crops -8.92 9.46 1.26 10.74 1.11 0.29
Nili Fodders 7.05 3.53 2.77 6.16 13.45 -0.11
Nili Oily Crops 3.99 22.63 2.32 25.27 30.66 -0.25
Nili Medical Plants -23.93 16.95 -0.14 16.81 -11.09 -0.08
Nili Vegetables 0.83 -0.98 0.49 -0.54 0.45 0.02
Fruits -3.94 -0.38 -0.02 -0.40 -4.28 4.64
Other agri -0.48 0.84 0.04 0.88 0.43 0.02
N-Wtr LossN-Wtr Loss &
Irrg-Eff
EfficiencyX-Wtr Gain
Source: model results.
Modelling Water Quality
27
Table 10: Factor Intensity by Agricultural Activity (Percent)
Labour Capital Nile-land Nile-waterGround-
land
Ground-
water
Rainfed-
landTotal
Winter Wheat 13.8 56.4 20.0 3.4 1.8 0.2 4.5 100.0Winter Cereals 22.2 29.8 34.6 4.6 1.3 0.0 7.5 100.0Winter Sugar
Beet12.3 64.2 16.9 2.8 0.0 0.0 3.8 100.0
Winter Fodders 2.5 83.7 6.0 5.1 0.4 0.0 2.2 100.0Winter Fibbers 14.4 59.0 18.4 3.8 0.1 0.0 4.3 100.0Winter Medical
Plants10.2 68.7 15.3 2.2 0.2 0.0 3.4 100.0
Winter
Vegetables7.7 84.1 5.8 0.8 0.4 0.1 1.3 100.0
Summer Rice 13.8 54.1 6.1 20.6 0.1 0.0 5.2 100.0Summer Other
Crops23.1 47.0 17.0 7.4 0.6 0.1 4.7 100.0
Summer Sugar
Cane11.4 70.1 2.3 13.1 0.1 0.0 3.1 100.0
Summer Cotton 24.7 59.0 10.9 2.7 0.0 0.0 2.6 100.0
Summer Fodders 4.8 77.8 9.7 2.7 2.2 0.4 2.4 100.0
Summer Oily
Crops15.1 62.5 15.6 2.4 1.0 0.0 3.4 100.0
Summer Medical
Plants12.1 64.6 14.6 5.0 0.0 0.0 3.8 100.0
Summer
Vegetables11.4 74.3 10.4 1.3 0.4 0.1 2.2 100.0
Nili Rice 11.4 54.3 13.4 0.5 17.6 0.2 2.7 100.0Nili Other Crops 23.0 47.2 12.9 9.9 2.3 0.2 4.4 100.0Nili Fodders 5.5 76.9 10.9 0.0 4.5 0.1 2.1 100.0Nili Oily Crops 18.4 39.7 30.4 1.8 3.6 0.0 6.1 100.0Nili Medical
Plants11.8 56.4 5.3 21.2 0.0 0.0 5.3 100.0
Nili Vegetables 11.4 73.6 8.5 2.9 1.3 0.1 2.2 100.0Fruits 14.4 63.2 9.5 4.7 4.8 3.4 0.0 100.0
Other agri
forestry fishing58.0 42.0 0.0 0.0 0.0 0.0 0.0 100.0
Modelling Water Quality
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Table 11: Factor Shares in Agricultural Value Added (Percent)
Labour Capital Nile-landNile-
water
Ground-
land
Ground-
water
Rainfed-
land
Winter Wheat 12.9 12.6 29.8 10.7 27.2 9.7 25.2Winter Cereals 0.7 0.2 1.8 0.5 0.7 0.0 1.4Winter Sugar Beet 1.4 1.8 3.1 1.1 0.1 0.0 2.6Winter Fodders 2.5 20.1 9.7 17.3 7.4 2.3 13.1Winter Fibbers 0.1 0.1 0.2 0.1 0.0 0.0 0.1Winter Medical
Plants0.2 0.3 0.4 0.1 0.1 0.0 0.3
Winter Vegetables 5.9 15.5 7.1 2.0 5.2 2.4 5.8
Summer Rice 6.2 5.8 4.4 30.7 0.9 0.0 14.0
Summer Other
Crops11.2 5.5 13.3 12.1 5.2 2.6 13.8
Summer Sugar Cane 2.2 3.3 0.7 8.5 0.3 0.0 3.6
Summer Cotton 4.0 2.3 2.8 1.5 0.0 0.0 2.5Summer Fodders 0.7 2.6 2.2 1.3 5.2 3.0 2.0
Summer Oily Crops 1.3 1.2 2.1 0.7 1.3 0.1 1.7
Summer Medical
Plants0.1 0.1 0.1 0.1 0.0 0.0 0.1
Summer Vegetables 8.5 13.3 12.4 3.2 5.0 2.1 10.0
Nili Rice 0.0 0.0 0.0 0.0 0.6 0.0 0.0Nili Other Crops 1.8 0.9 1.6 2.5 2.9 0.9 2.0Nili Fodders 0.1 0.3 0.3 0.0 1.2 0.1 0.2Nili Oily Crops 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Nili Medical Plants 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Nili Vegetables 1.3 2.0 1.6 1.1 2.4 0.5 1.5
Fruits 6.2 6.5 6.5 6.6 34.1 76.2 0.0
Other agri forestry
fishing32.8 5.7 0.0 0.0 0.0 0.0 0.0
Agr. Value Added 100.0 100.0 100.0 100.0 100.0 100.0 100.0